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Reasonable care

Reasonable care

Reasonable care is an important element of the Code of Professional Conduct (Code) in the Tax Agent Services Act 2009 (TASA).

Under the Code, you are required to take reasonable care:

  • in ascertaining a client’s state of affairs that is relevant to a statement you make or a thing you do on behalf of a client (Code item 9)
  • in ensuring taxation laws are applied correctly to the circumstances in relation to which you provide advice to a client (Code item 10).

There is no set formula for determining what it means to take reasonable care in any given situation. Determining what reasonable care is will involve you exercising your professional judgement, taking into account relevant factors including:

  • the terms of engagement between you and your client
  • the complexity of the transaction
  • your client’s circumstances, including their level of sophistication (such as their level of tax knowledge in the subject area)
  • the nature of any pre-existing relationship between you and your client.

The terms of the engagement with a client may arise in a variety of ways, including a letter of engagement, an email or via telephone. It is prudent to have a written agreement (such as a letter of engagement) between you and your client that sets out the terms and conditions of the arrangement.

Ascertain a client's state of affairs

You must take reasonable care in ascertaining your client’s state of affairs to the extent that it is relevant to:

  • a 'statement' you make, or
  • a ‘thing’ you do for your client.

For example:

  • a ‘statement’ could be a statement you make to the Commissioner of Taxation or to your client when providing taxation advice
  • a ‘thing’ you do could include providing taxation advice to your client, or preparing and lodging returns, statements, objections or appeals on behalf of your client.

The Code does not require you to ‘audit’, examine or review books and records or other source documents to independently verify the accuracy of information supplied by your clients. However, you may not automatically discharge your responsibility in particular cases by simply accepting what you have been told by your client.

When an existing client provides information that seems credible (and is consistent with the client’s previous statements) and you have no basis to doubt the information supplied, you may use your professional judgment in accepting the information without further checking.

However, if the information provided does not seem credible, or appears to be inconsistent with the client’s previous claims or statements, further enquiries would be required having regard to the terms of the engagement with your client.

If your client’s circumstances have changed, you need to consider what additional questions you need to ask them to ascertain their state of affairs relevant to the tax agent or BAS services being provided.

Even if the agreed scope of services excludes the examination of information provided by the client, you should make further enquiries or decline to act for them if you know (or reasonably ought to have identified) that the information supplied does not seem credible.

If the service you are providing requires you to rely on the information or advice of another expert, further enquiries are not required unless you identify (or reasonably ought to have identified) that the information was incorrect or incomplete.

For further information, refer to TPB(I) 17/2013 Code of Professional Conduct – Reasonable care to ascertain a client’s state of affairs


The following example illustrates the general application of Code item 9.

Making appropriate enquiries of a new client

A BAS agent is engaged by a new client to prepare and lodge the client’s quarterly BAS.
The new client has been referred to the BAS agent by a tax agent. When preparing the BAS, the BAS agent notices that certain transactions appear to be abnormal for the client’s industry. When questioned about the transactions, the client is vague and does not provide sufficient clarity to satisfy the BAS agent that the transactions have been appropriately recorded and relate to the client’s business.

As such, the BAS agent raises their concerns with the referring tax agent. The tax agent tells the BAS agent to include the transactions with a note for the tax agent to look at the transactions more closely at the end of the reporting period, which the BAS agent does.

In this circumstance the BAS agent has discharged their obligations by raising the concerns with the tax agent and making a note for the tax agent to review the transactions in question at the end of the reporting period. The tax agent must also ensure that they take reasonable care in ascertaining the client’s state of affairs when reviewing the transactions.

Ensure taxation laws are applied correctly

You must take reasonable care to ensure you correctly interpret and apply taxation laws to your client’s circumstances when you provide advice.

While there is no set formula, this may include referring to legislation and other relevant materials issued by the Australian Taxation Office, recognised professional associations, specialists or other registered tax or legal practitioners.

For further information and practical examples, refer to TPB(I) 18/2013 Code of Professional Conduct – Reasonable care to ensure taxation laws are applied correctly

Failure to take reasonable care

If you fail to take reasonable care in ascertaining a client’s state of affairs or applying taxation laws correctly to your client's circumstances, we may find that you have breached the Code and impose sanctions for that breach.

Further information

For more information, refer to:

Last modified: 8 October 2021